12-14-11; Premium-shifting WC policy plan upheld in Federal Court

In Wausau Underwriters Insurance Co. v. Pronto Staffing Services, No. 1:11-cv-00928, N.D. Ill., issued December 2, 2011, Defendant Pronto Staffing purchased workers’ compensation insurance policies from Plaintiff Wausau Underwriters Insurance Company. The policies at issue in this case had a retrospective premium endorsement that allowed Wausau to adjust the premium up or down based on Pronto’s claim activity.

The record indicates Wausau adjusted the premiums up for three policies running from April of 2007 through April of 2010, and billed Pronto for $229,012.00. Pronto Staffing alleged their WC claims were mishandled and refused to pay the heightened amounts. In our review of this federal decision, we do not see clear evidence of mishandling of claims were presented—the Court appears to have been made aware of a single claim being objected to by Defendant Pronto Staffing.

After Pronto refused to pay the retro increases, Wausau filed suit. In response, Pronto filed affirmative defenses and a two-count counterclaim alleging that Wausau had breached the insurance contracts (Count I) and was liable for a breach of fiduciary duty based on its allegedly negligent adjustment of claims, which wrongfully caused Pronto’s premiums to go up (Count II).

The U.S. District Court judge ruled no fiduciary duty exists in the contractual relationship between an insurer and its insured under state law. Accordingly, she granted dismissal.

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